IMF Executive Board Approves US$3.3 Billion Under the Extended Credit Facility/Extended Fund Facility and US$1.4 Billion Under the Resilience and Sustainability Facility for Bangladesh

IMF News, January 30, 2023

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IMF Executive Board Approves US$3.3 Billion Under the Extended Credit Facility/Extended Fund Facility and US$1.4 Billion Under the Resilience and Sustainability Facility for Bangladesh

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Bibliographic details

• Published: January 30, 2023

Financing approval and program design

• Executive Board approved ECF/EFF arrangements of SDR 2.5 billion (equivalent to 231.4 percent of quota or about US$3.3 billion).
• Concurrent RSF arrangement approved of SDR 1 billion (equivalent to 93.8 percent of quota or about US$1.4 billion).
• Approval enables immediate disbursement of SDR 352.35 million (about US$476 million).
• Program duration: 42-month arrangements.
• Bangladesh is the first country in Asia to receive financing under the RSF.

Program objectives and reform priorities

• Program aims to:
  • Preserve macroeconomic stability and rebuild buffers.
  • Protect the vulnerable and prevent disruptive adjustments.
  • Foster inclusive and green growth.
• Reforms will focus on:
  • Creating fiscal space to enable greater social and developmental spending.
  • Strengthening the financial sector, including oversight, governance, and regulatory framework.
  • Modernizing policy frameworks and improving public finance, investment, and debt management.
  • Building climate resilience and catalyzing additional official and private finance via RSF.
  • Implementing a domestic revenue mobilization strategy relying on tax policy and revenue administration reforms.
  • Structural reforms to expand trade and foreign direct investment, deepen the financial sector, develop human capital, and improve governance to enhance the business climate.

Economic context and rationale

• Recent shocks:
  • Bangladesh’s robust recovery from the pandemic was interrupted by Russia’s war in Ukraine, causing a sharp widening of the current account deficit, depreciation of the Taka, and a decline in foreign exchange reserves.
• RSF purpose:
  • Supplement ECF/EFF resources to expand fiscal space for climate investment priorities, strengthen institutions, and enhance climate-spending efficiency to build resilience and catalyze additional financing.
• Long-term goals:
  • Support Bangladesh’s aspiration to reach upper-middle income status by 2031 and meet the Sustainable and Development Goals (SDGs).

Selected economic indicators (FY2019–27) — key series (as reported)

• Real GDP (FY19–FY27): 7.9, 3.4, 6.9, 7.2, 5.5, 6.5, 7.1, 7.3, 7.4
• Consumption — Private (FY19–FY27): 4.9, 3.0, 8.0, 13.2, 7.6, 4.1, 4.7, 5.7
• Gross Capital Formation (FY19–FY27): 8.6, 0.2, 8.1, 10.0, -6.2, 10.5, 12.4, 11.8, 10.9
• Exports of goods and services growth (selected years): 11.5, -17.5, 9.2, 23.2, -7.2, 8.9, 9.0
• Imports of goods and services growth (selected years): 0.5, -11.4, 15.3, 45.1, -22.6, 14.2, 5.1, 6.0
• GDP deflator (selected values): 3.7, 3.8, 5.0, 5.2, 4.8, 4.5, 5.4
• CPI inflation (annual average): 5.6
• CPI inflation (end of period): 5.9
• Central Government: Total revenue and grants (percent of GDP, selected years): 8.5, 9.4, 8.7, 8.8, 9.7, 10.3, 10.2
• Central Government: Total expenditure (percent of GDP, selected years): 13.6, 13.3, 13.0, 12.6, 14.5, 14.4, 14.8, 15.2
• Overall balance (including grants, percent of GDP, selected years): -5.4, -4.8, -3.6, -3.8, -5.6, -5.1, -5.0
• Public sector total debt (percent of GDP, FY19–FY27): 32.0, 34.5, 35.6, 39.0, 42.1, 42.2, 42.3, 42.5
• Of which: External debt (percent of GDP, FY19–FY26): 14.6, 15.1, 17.0, 18.9, 19.0, 18.6, 18.1, 17.3
• Current account balance (percent of GDP, FY19–FY26): -1.3, -1.5, -1.1, -4.1, -3.2, -4.2, -3.5
• Trade balance (percent of GDP, FY19–FY26): -6.4, -10.8, -7.6, -8.4, -6.7
• Transfers (percent of GDP, selected): 5.3, 4.2
• Of which: Remittances (percent of GDP, selected): 4.6, 4.4
• Financial account balance (percent of GDP, selected): 1.5, 2.3, 3.1, 2.5
• Foreign direct investment, net (percent of GDP, selected): 0.3, 1.0, 1.2, 1.3
• Gross international reserves (billions of U.S. dollars, FY19–FY26): 32.7, 36.0, 46.4, 33.4, 30.0, 34.2, 40.0, 53.1
• Reserves in months of next year's imports (selected): 3.5
• Broad money (M2) growth (selected years): 52.0, 53.8, 54.6, 52.8, 53.6, 54.2, 54.8, 55.4
• Credit to private sector (percent of GDP, selected): 37.2, 37.3, 36.2, 36.6, 36.7, 37.5, 37.9, 38.0, 38.7
• Gross national savings (percent of GDP, FY19–FY26): 31.1, 31.4, 30.8, 25.6, 27.8, 28.0, 30.2, 32.9
• Gross investment (percent of GDP, FY19–FY26): 32.2, 31.3, 31.0, 31.7, 33.7, 35.0, 35.8

Key messages from IMF management (Ms. Antoinette M. Sayeh)

• Emphasized steady progress in reducing poverty and improving living standards since independence, noting setbacks from COVID-19 and Russia’s war in Ukraine.
• Stressed the need to accelerate an ambitious reform agenda, invest substantially in human capital and infrastructure, and tackle climate change risks to protect macroeconomic stability.
• Noted RSF will complement ECF/EFF reforms by improving climate investment potential, strengthening institutions, and catalyzing additional finance.

Source: IMF Press Release No. 23/25, January 30, 2023.

References

• https://www.imf.org/en/about/senior-officials/bios/antoinette-monsio-sayeh
• PRESS CENTER
• Bangladesh and the IMF
• IMF-World Bank Debt Sustainability Framework for Low-Income Countries -- A Factsheet
• Special Drawing Rights (SDRs) -- A Factsheet
• Press Releases
• ECF
• EFF
• RSF
• U.S. dollar per SDR
• https://www.imf.org/en/home